Washington Post 2012 Annual Report Download - page 54

On February 6, 2008, a purported class-action lawsuit was filed in the U.S. District Court for the Central District of
California by purchasers of BAR/BRI bar review courses, from July 2006 onward, alleging antitrust claims against Kaplan
and West Publishing Corporation, BAR/BRI’s former owner. On April 10, 2008, the court granted defendants’ motion to
dismiss, a decision that was reversed by the Ninth Circuit Court of Appeals on November 7, 2011. The Ninth Circuit
also referred the matter to a mediator for the purpose of exploring a settlement. In the fourth quarter of 2012, the parties
reached a comprehensive agreement to settle the matter. The settlement is expected to be presented to the District Court
for approval in the first quarter of 2013.
On or about January 17, 2008, an Assistant U.S. Attorney in the Civil Division of the U.S. Attorney’s Office for the
Eastern District of Pennsylvania contacted KHE’s CHI-Broomall campus and made inquiries about the Surgical Technology
program, including the program’s eligibility for Title IV U.S. Federal financial aid, the program’s student loan defaults,
licensing and accreditation. Kaplan responded to the information requests and fully cooperated with the inquiry. The DOE
also conducted a Program Review at the CHI-Broomall campus, and Kaplan likewise cooperated with the Program
Review. On July 22, 2011, the U.S. Attorney’s Office for the Eastern District of Pennsylvania announced that it had
entered into a comprehensive settlement agreement with Kaplan that resolved the U.S. Attorney’s inquiry, provided for the
conclusion of the DOE’s program review and also settled a previously sealed U.S. Federal False Claims Act (False Claims
Act) complaint that had been filed by a former employee of the CHI-Broomall campus. The total amount of all required
payments by CHI-Broomall under the agreements was $1.6 million. Pursuant to the comprehensive settlement agreement,
the U.S. Attorney inquiry has been closed, the False Claims Act complaint (United States of America ex rel. David
Goodstein v. Kaplan, Inc. et al.) was dismissed with prejudice, and the DOE will issue a final program review
determination. At this time, Kaplan cannot predict the contents of the pending final program review determination or the
ultimate impact the proceedings may have on the CHI-Broomall campus or the KHE business generally.
Several Kaplan subsidiaries were or are subject to four other unsealed cases filed by former employees that include,
among other allegations, claims under the False Claims Act relating to eligibility for Title IV funding. The U.S. Government
declined to intervene in all cases, and, as previously reported, court decisions in 2011 either dismissed the cases in their
entirety or narrowed the scope of their allegations. The four cases are captioned: United States of America ex rel. Carlos
Urquilla-Diaz et al.v. Kaplan University et al. (unsealed March 25, 2008); United States of America ex rel. Jorge Torres
v. Kaplan Higher Education Corp. (unsealed April 7, 2008); United States of America ex rel. Victoria Gatsiopoulos et al.
v. ICM School of Business & Medical Careers et al. (unsealed September 2, 2008); and United States of America ex rel.
Charles Jajdelski v. Kaplan Higher Education Corp. et al. (unsealed January 6, 2009).
On August 17, 2011, the U.S. District Court for the Southern District of Florida issued a series of rulings in the Diaz case,
which included three separate complaints: Diaz, Wilcox and Gillespie. The court dismissed the Wilcox complaint in its
entirety; dismissed all False Claims Act allegations in the Diaz complaint, leaving only an individual employment claim;
and dismissed in part the Gillespie complaint, thereby limiting the scope and time frame of its False Claims Act
allegations regarding compliance with the U.S. Federal Rehabilitation Act. On October 31, 2012, the court entered
summary judgment in favor of the Company as to the sole remaining employment claim in the Diaz complaint. The
Gillespie complaint is proceeding to the discovery and dispositive motion phases.
On August 23, 2011, the U.S. District Court for the Southern District of Florida dismissed the Torres complaint in its
entirety and entered a final judgment in favor of Kaplan. That case was appealed to the U.S. Court of Appeals for the
Eleventh Judicial Circuit, but the appeal was subsequently dismissed for want of prosecution.
On August 9, 2011, the U.S. District Court for the Southern District of Florida granted in part Kaplan’s motion to dismiss
the Gatsiopoulos complaint, which limited the allegations in that case to alleged violations of U.S. Federal incentive
compensation regulations and so-called “70 percent rules,” and an individual employment claim and limited the time
frame applicable to these claims. Thereafter, the relators voluntarily dismissed the “false claims” allegations and the
remaining employment claim was settled. The case was dismissed in the first quarter of 2012.
On July 7, 2011, the U.S. District Court for the District of Nevada dismissed the Jajdelski complaint in its entirety and
entered a final judgment in favor of Kaplan. On February 13, 2013, the U.S. Circuit Court for the Ninth Judicial Circuit
affirmed the dismissal in part, and reversed the dismissal on one allegation under the False Claims Act relating to
eligibility for Title IV funding based on claims of false attendance. Kaplan is evaluating the decision and its options for
next steps, including seeking a re-hearing in the appellate court.
On October 21, 2010, Kaplan Higher Education Corporation received a subpoena from the office of the Florida
Attorney General. The subpoena sought information pertaining to the online and on-campus schools operated by KHE in
and outside of Florida. KHE has cooperated with the Florida Attorney General and provided the information requested in
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